Table 24-5

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown in the following table. The base year is 2017.

Year

Movies

Price   Quantity

(Dollars per movie)   (Movies)

Popcorn

Price   Quantity

(Dollars per bag) (Bags)

2016 10.00 500 5 1,000
2017 11.00 600 4 900
2018 12.00 650 5 950
2019 12.00 625 6 925

Refer to Table 24-5. What was this country's nominal GDP in 2016?

Question

Table 24-5

A hypothetical country of Lahland produces only movies and popcorn. Quantities and prices of these goods for the last several years are shown in the following table. The base year is 2017.

​

Year

Movies

Price                            Quantity

(Dollars per movie)    (Movies)

Popcorn

Price                        Quantity

(Dollars per bag)               (Bags)

2016	10.00	500	5	1,000
2017	11.00	600	4	900
2018	12.00	650	5	950
2019	12.00	625	6	925

​

Refer to Table 24-5. What was this country's nominal GDP in 2016?

BlackTom AI · Accepted Answer

Nominal GDP equals the sum of current-year prices times current-year quantities for all goods, so compute 2016 price × 2016 quantity for movies and for popcorn and add them.

Relevant concepts:
- Nominal GDP measures output using that year’s prices (no inflation adjustment).
- Real GDP would use base-year prices, but here we are asked for nominal GDP in 2016, so use 2016 prices and 2016 quantities.

Step-by-step calculation with all intermediate steps:
1. Movies (2016): Price per movie = $10.00; Quantity = 500 movies.
   Multiply: 10.00 × 500 = 5,000.
2. Popcorn (2016): Price per bag = $5.00; Quantity = 1,000 bags.
   Multiply: 5.00 × 1,000 = 5,000.
3. Add the two product totals to get nominal GDP:
   Movies total (5,000) + Popcorn total (5,000) = 10,000.

Why this is correct:
- Nominal GDP uses the actual prices and quantities in the same year. We used 2016 prices with 2016 quantities for both goods, so the calculation directly gives nominal GDP for 2016.

Why common alternatives are incorrect:
- Using base-year (2017) prices to value 2016 quantities would give real GDP for 2016 in 2017 dollars: 11×500 + 4×1,000 = 5,500 + 4,000 = 9,500. That is real GDP, not nominal GDP.
- Adding prices instead of multiplying price × quantity, or using mismatched years for price and quantity, would produce incorrect totals.
- Any answer other than $10,000 fails to apply the definition of nominal GDP (price × quantity for the same year for each good).

Conclusion: The nominal GDP for Lahland in 2016 is $10,000, which matches the given correct answer.

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